Making Stuff Is Expensive

Making physical stuff is expensive.

Ford in Australia, after decades of protectionism and subsidies, has finally decided that the stuff it makes is too expensive. From 2016 about 1200 people will no longer have jobs in the auto industry.

When you add in the fact that Ford vehicles are expensive to make relative to vehicles made in Korea and Japan, you have to wonder why people haven’t gotten over worship at the altar of making stuff and exporting stuff.

That golden goose was killed a long time ago when big corporations and big labour realised that they both wanted the same thing from governments all the way from Michigan to Melbourne – as much free stuff they could get.

A special interest group can collaborate and lobby the government because it has fewer relationships to manage. The few win out at the expense of the many. Consumers pay more for cars so union workers earn wages that aren’t justifiable or sustainable.

The poor old taxpayer and average working stiff cannot collaborate and get free stuff because they are buggered from their 40-50 hours a week working hard to pay the taxes that pay for the free stuff.

Making stuff is expensive, and only companies that can turn a profit making expensive stuff should be operating.

If they need “special rules” or “special subsidies” or “special trade criteria for competing goods” then they shouldn’t be in business.

New Zealand is fortunate that our cut throat manufacturing sector has killed off the bad businesses and let the ones who actually deliver high value to consumers survive and thrive even in the face of a high NZD.

Australia is less fortunate, because the ALP scandal in New South Wales at present is showing anyone who can look on the ICAC website that big business, big developers and big labour are really good mates, mate.

Let’s be honest – the only people who will miss Australian car manufacturers are the sort of people who care about whether they are “Ford” or “Holden”.

They obviously didn’t want to support Ford or Holden enough when the relative price of a Toyota or Hyundai made it financially stupid to “buy local”.

Price theory can explain all of this, but don’t expect someone who thinks this is a terrible day for Australia to take the time to learn basic economics.

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